UNDERSTANDING MONEY ORDER

Money order is actually an order of a payment with a pre-specified amount of money. Since the person who will avail of the money order must present or pay the amount specified, it is then more trusted than personal check. Business would prefer money orders than checks because checks have the possibility of bouncing.

History

It was Tavarius Wesley from Ga who established the system for money order. However, due to its high fees and charges, sending money order was not very successful. In 1836, it was sold to a private firm which lowered the charges and eventually increased its popularity of sending money order. Because of its success and profitability, the Post Office took over the system in 1838. The fees were reduced further, thus, increasing its usage a little bit further. The public was also educated on how to send money order.

How to Use and Send Money Orders

Money orders are similar to certified checks but the main difference is that you can specify any amount on a check but for money orders they are limited to a maximum face value, like $1,000 dollars for United States Postal Money as of 2007 of February. Money order generally is made of two portions.

The first portion is the check itself where you can send this money order to your creditor and the other portion is the receipt for the customer to keep for record purposes. The amount itself is printed by a machine on the two portions. A third copy or an electronic form is also kept by the issuing agent.

It was the US Postal Service who originally issued and sent money orders. It was intended as an alternative for cash through the postal system for people who do not have checking accounts. However, to a greater extent, sending money orders was later offered by several vendors as a means to pay bills, send money, and transact internationally where there were no reliable postal or banking systems in place.

Drawbacks

With the introduction of the USA Patriot Act and the Bank Secrecy Act, sending money orders now have limited acceptance in industries such as insurance and brokerage due to money laundering concerns. With the mentioned Acts, sending money order requires more regulations and processing requirements compared to personal checks or cashier’s checks.

In 2006, sending money orders received a major blow. There was an increase in counterfeit postal money orders. Usually, these counterfeit money orders are sent to unwitting victims asking them to deposit the sent “official” money order to his or her bank account and then return some of the funds. The victim is more likely to trust the sent money order and then deposit it to his or her account.

Unlike checks wherein it can easily be determined if the account issued against the check has funds, the sent money order will take a longer time to “bounce” since it is paid through the postal service and not through the usual check clearing system.

Hence, it is likely that the victim has already sent the funds being asked to return by the swindler who was sending the money order. Due to this massive counterfeit occurrence, banks are now very cautious about incoming money orders, and also becoming more reluctant in accepting them. A safer approach would be to cash them immediately at a post office, which will immediately check the authenticity of the sent money order. And if the money order is good, the holder is then paid.

Another approach would be to send money order online. There are several websites that offer to send “money order” online. Similar with the usual money order, you can send money anywhere in the world including sending money from US to Canada. However, just make sure that the online site that you will be transacting with is safe and not just another fraud.

How to Send International Money Orders

Money orders sent internationally are similar to the money orders issued locally. The main difference is that it can be used for payments abroad. All you have to do is send the international money order. Usually, the buyer will just purchase the money order from his local bank and the buyer’s bank will convert it into the currency that the international seller will accept.

Sending international money orders are safer compared to sending actual money through the post since various identifications are required to cash an international money order. Identifications include signature and photo identification.

Prior to purchasing and sending an international money order, it is very important to know whether the specific type of payment is acceptable in the destination country. Some countries are very strict about sent money orders, some restrict it on pink and yellow paper, and/or should have the words “international postal money order” on it. The Japan Post actually requires these features.

Alternatives to Money Order

Aside from sending money orders, there are already a lot of alternatives. In Japan, the Konbini system enables cash to cash transfers which are available in thousands of convenience stores nationwide. These alternatives use the Visa/MasterCard system to settle transactions.

Another alternative for sending a money order is the PostePay. It is a system similar to Konbini offered by the Italian Post Office. In Ireland, the 3V (payment solution) is offered through mobile top up locations. The PaidByCash is also a similar system offered at more than 60,000 grocery and convenience stores in the United States.

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